Report: Korean Auto Imports Threaten U.S. Manufacturers

Free Trade Agreement unlikely to increase sales of U.S. cars in South Korea

A former reporter and bureau chief for broadcast outlets and magazines, Truman Lewis has covered presidential campaigns, state politics and stories ranging from organized crime to environmental protection.
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A newly released study by the U.S.
International Trade Commission (USITC) warns that the already
hard-hit U.S. auto industry is in for more pain if a new trade
agreement is approved by Congress.

The study was requested following a
December 2010 “supplemental deal” that exempted some
U.S. autos from having to meet stringent Korean auto safety and
environmental standards.

“The latest
study confirms that, even with the supplemental agreement, very few
U.S. autos will be sold in Korea, and a huge increase in Korean
auto imports into the U.S. is predicted,” said Todd Tucker,
research director of Public Citizen’s Global Trade
Watch.

“Moreover,
the new study did not alter the previous findings that the
bilateral and global balance in autos will worsen under this
agreement, nor that the U.S. will see an increase in its overall
global trade deficit,” Tucker said.

The USITC’s newest findings
were not unexpected. The December supplemental deal did not change
the ultimate tariff phase-outs – just the timelines over
which tariffs go to zero. The USITC’s initial 2007 study on
the Korea Free Trade Agreement (FTA) found that the U.S. auto
deficit would increase by $531 million to $708 million as a result
of the pact.

“The House
GOP leadership didn’t like that finding, so they requested a
new one that incorporated the changes made to the pact in
2010,” said Tucker.

In the new study, the USITC noted
that slightly improved numbers on U.S. exports to Korea “stem
from changes to the economic environment (e.g., the recent economic
downturn) and declines in trade flows in 2009.”

“Bizarrely,
House Ways & Means Committee Chairman Dave Camp (R-Mich.)
celebrated this new finding, which is akin to celebrating the worst
job environment in a generation,” said Tucker. “While
touting an estimate that the supplemental deal will increase U.S.
auto exports to Korea by between $48 million and $66 million,
Chairman Camp fails to note that his new study does not change the
initial troubling finding that U.S. imports from Korea will also
increase $907 million.”

Bad news for
autoworkers

Tucker said the findings of the new
USITC study, though already bad news for U.S. autoworkers, are also
likely to be underestimating the actual damage and inflating the
prospective benefits of the FTA and supplemental agreement, for
several reasons:

• The
USITC refused to incorporate into its modeling more realistic
assumptions about Korean consumer preferences, which are
overwhelmingly biased in favor of domestically made
goods.

• The
USITC also did not incorporate into its model the fact that
“South Korean” autos can be made with up to 65 percent
Chinese or North Korean content and still receive the privileges of
the deal.

• The
USITC did not address the concern that members of Congress,
industry and unions had that the “transplant” Korean
companies now producing in the U.S. South might reduce their
employment there, as tariffs are phased out and it becomes easier
to simply ship Korean-made cars to the United
States.

“Given that
Koreans already are disinclined to buy foreign cars, a high-profile
exemption of U.S. cars from having to meet Korea’s strong
safety and environmental standards will only exacerbate Korean
consumers’ notions that imports are inferior,” said
Tucker.

President Barack Obama campaigned
and won on overhauling our unfair trade policies. Instead, what
Americans face with the Korea FTA is the same George W. Bush North
American Free Trade Agreement-style agreement, with slightly
altered auto tariff schedules, Public Citizen maintains.

The Korea trade deal is still
projected to increase the overall U.S. trade deficit and cost
159,000 U.S. jobs.

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